Fund Your Startup through Corporations
We launched the third program in our Entrepreneurial Education Series, “Connecting Corporations and Startups,” on September 24th with our partner 1871 and sponsor The Wall Street Journal.
The event brought together powerhouse entrepreneurs, corporate venturers, and corporate executives Jacob Babcock (CEO & Co-Founder, NuCurrent), Hardik Bhatt (CIO, State of Illinois), Rob Diebold (Strategic Business Development Manager, Molex), Rumi Morales (Executive Director, Strategic Investment Group, CME Group), Julie Szudarek (SVP, Getaways, Live, and Things to Do, Groupon), and David Weinstein (Founder and Managing Partner, Freshwater Advisors) to share their insights on selling to, partnering with, and garnering investment from corporations.
If you missed the event or just want a quick recap, read on for highlights from the discussion.
The panel focused on three key areas: corporate sales, corporate partnerships, and corporate venturing. Moderator Pete Willkins (Managing Director, Hyde Park Angels) clearly defined each area to frame the discussion. “Selling means the corporation is a client; strategic partnership means you’re working together to sell; [and] corporate venturing means a corporation invests in you.”
The conversation kicked off with a discussion of selling, with David Weinstein emphasizing, “What is the best form of capital in your business? Capital revenue.” While corporate venturing and investment are valuable for a business, sales are key to its survival, and often times, whether it can even attract investment in the first place.
So how do you even make those sales? It all starts with clearly understanding the corporation’s main business pain. If you can figure out what major problem the key C-Level decision-makers are grappling with and how your business can solve it, then you can begin your sales process. As David Weinstein put it, “a quick no is your second best answer because a slow maybe [or no] is the death of your business.” If you spend your time trying to sell a product that doesn’t solve the corporation’s big pain, or you are addressing that pain with the wrong solution, then you’re going to slow down your own sales cycle and hurt your reputation in the meantime.
Having a sales team that clearly understands the corporation’s business pain and your startup’s value proposition is also essential to successful selling. Your salespeople are the ones who will use their inroads to target clients and often make the connections that get your foot in the door, so as Julie Szudarek pointed out, “when you’re hiring salespeople, put them through the ringer like mad.” You need to make sure potential buyers are getting your absolute best pitch, and the best pitch, hands down, is one that clearly communicates your value in the context of their problem.
Successful strategic partnerships are built on mutual understanding; specifically, a mutual understanding of how each business can accelerate its respective growth trajectory by collaborating on sales. In this type of relationship, you need to be clearly aligned on not only your respective objectives and benchmarks for success, but also your expectations, especially your target timelines.
On way to make sure your expectations match up is to do your homework on potential partners before you even get into a meeting. Based on his experience at CISCO and now at the State of Illinois, Hardik Bhatt stressed the importance of targeting the right people. For example “If your innovation is for public sector only, it’s going to be long sales cycle. You’ll need a patient corporate partner.” You can figure out who is patient and who is not by leveraging the entrepreneurial ecosystem, talking to former partners, and even having candid (but respectful) conversations with the executives you meet.
On the flip side, remember that executives in the same industry also run in the same circles, so they will know who you are and what you’re selling in advance. Cultivating a strong reputation even with corporations that don’t convert into partners is essential to keeping doors open with other potential partners.
Rumi Morales stressed that CME’s corporate venturing investment thesis focused on companies that could potentially disrupt or create opportunities in its industry. Namely, “what are you creating that’s new? What’s going to enhance the world as we know it?”
Across the board, this sentiment applies to all types of corporate venturing. However, not all corporate venturers operate with the same goals in mind. All of the panelists agreed that depending on the corporation, the objective could be a return on investment, access to a new market, opportunities to innovate, or all of the above.
Rob Diebold of Molex, NuCurrent’s corporate partner and investor, echoed this point by explaining, “startups can innovate faster than we do,” but the innovation has to be game-changing for both sides, otherwise success is harder to achieve. He added that the relationship with NuCurrent wouldn’t have been so appealing if they’re technology didn’t fit into Molex’s own goals for their products.
Jacob Babcock echoed this observation, but from the entrepreneur’s perspective, “capital is not especially grand unless one of the investors [corporate or otherwise] has something critically valuable to contribute.” In other words, just because you’re in a position where you need capital doesn’t mean you should take it from anywhere. Always keep your strategic goals and vision in mind because your investors should be aligned with both.
About Hyde Park Angels
Hyde Park Angels is transforming early-stage investing by taking a people first approach. The organization is the largest and most active angel group in the Midwest. With a membership of over 100 successful entrepreneurs, executives, and venture capitalists, the group provides critical strategic expertise to entrepreneurs and the entrepreneurial community. Nearly 40% of our members have founded a company, 88% are CEO’s, top executives or corporate board members, and 100% invest in startups. By leveraging the members’ deep and broad knowledge of multiple industries and financial capital, Hyde Park Angels has driven multiple exits and invested millions of dollars in over 40 portfolio companies that have created over hundreds of jobs in the Midwest since 2006.
About the Author
Alida Miranda-Wolff heads up communications and strategy at Hyde Park Angels, crafting and disseminating the organization’s brand in all forms across all channels. In addition to single-handedly building HPA’s integrated communications plan and executing its core elements, Alida manages membership, partnerships, portfolio company support, and all community engagement.
Prior to joining Hyde Park Angels, Alida served in a variety of journalism, marketing, communications, and management roles, specializing in creating spreadable multimedia content for tech-enabled businesses at all stages. Alida has run several Kickstarter campaigns, including one of the most successful in Chicago history, and still mentors companies running their own campaigns.
Alida graduated Phi Beta Kappa from the University of Chicago in 2014 with multiple honors and awards. She remains active in the university of alumni network, serving on five advisory boards and committees. Alida is also a published author and poet, with two poetry chapbooks currently in print, Domestic Scenes and Tree Fingers.